The foreign currency exchange market is a very fast-paced, intriguing and lucrative industry. Many individuals, professional and not, find it the perfect place to make some money while having fun. However, as many advantages are there are, there are also many disadvantages. One of these is the long hours. Another is the competitive environment. If you combine these factors, you will arrive at the increasingly stressful environment that is the forex industry.
Some traders thrive on the stress; however there are those which collapse underneath the pressure. It is at this point when individuals require different forms of therapy including counselling and pharmaceuticals. Yet, we all have innate coping mechanisms which enable us to fight these stressful situations. This article will look at the detrimental psychological problems one should be aware of when trading forex. If one is able to identify these, one may be able to seek psychiatric help before further psychological damage occurs.
Facing Your Inner Demons
It is important for forex traders to be fully aware of and accepting of their personalities when trading forex. The individual’s personality defines their trading strategy and manner of trading. The acceptance thereof makes them either successful or unsuccessful.
While the trader may be accepting of his personality, he must also acknowledge others and their place in the ‘trading game’. It is believed the forex trader must be impartial to others and focus solely on himself, but if he becomes too hard-line he will revert into himself becoming overly egotistic. It is at this point that he will be unable to accept losses and will blame others for his mistakes. He will not be able to identify errors in his analysis and strategy, thus finding himself unable to adapt to the changing market and incurring substantial losses.
The Forex Traders Bias
In the forex industry, traders understand two types of bias: trade-fear bias and sensory-deprived bias.
Sensory-deprived bias refers to a forex trader’s behaviour when trading forex. It involves the trader’s ability to trade without conducting further analysis of the market. While he is basing his trades on facts, he does not complete analysis on the facts and thus will be trading on infallible information. In short, he will be trading on biased information.
Trade-fear bias is a complicated, psychological style of bias. This type of behaviour involves a trader showing a fear of trading. Instead of examining the different avenues within the forex market, he will restrict himself to the market in which he is comfortable regardless of whether he makes profits or losses.
Acting On These Ideals
Once a forex trader has successful identified and acknowledged the potential psychological problems, he is in a position to take action and overcome these barriers to success. Arguably the easiest technique to mental health is to define the path of success. This includes creating a timeline where the trader is required to identify where he was, where he is now and where he wishes to be. This encourages the exploration of goals and acceptance of errors.
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